Chapter 10: Building an Organisation Capable of Good Strategy Execution: People, Capabilities, and Structure

Question 1

What are 10 critical success factor to good strategy execution/implementation?

Answer 1

1) Staffing the organisation with a strong management team and competent employees (Ch.10)
2) Building and strengthening core competencies and competitive capabilities (Ch.10)
3) Create a strategy-supportive organisational structure (Ch.10)
4) Having sufficient budget and other resources to strategy execution effort (Ch.11)
5) Apply a strategy-supportive policies and procedures (Ch.11)
6) Using process management tools to drive continuous improvement (and adopt best practices)(Ch.11)
7) Leverage the benefits of information and operating systems in enabling employee to carry out their strategic roles proficiently (Ch.11)
8) Offer/tying rewards and incentives to the strategy execution (Ch.11)
9) Instill a corporate culture that promotes good strategy execution (Ch.12)
10) Practice strategic leadership (Ch.12)

Question 2

Putting together a strong management team is a cornerstone of the organisation-building task. The most important consideration is:

Answer 2

To fill key managerial slots with smart people who are clear thinkers, capable of figuring out what needs to be done, good at managing people, and skilled in delivering good results.

Without a smart, capable, results-oriented management team, the implementation process is likely to be hampered by missed deadlines, misdirected or wasteful efforts, and managerial ineptness.

Weak executives cannot differentiate between ideas that have merit and those that are misguided. In contrast, strong managers are good at getting things done through others, partly by making sure they have the right people under them and put in the right job.

Question 3

7 common practices among companies dedicated to recruiting, training, and retaining the most capable people they can find:

Answer 3

1) Spend considerable effort on screening and evaluating job applicants
2) Put employees through training programs throughout their careers
3) Provide promising employees with challenging, interesting, and skill-stretching assignments
4) Rotate people through jobs that span functional and geographic boundaries.
5) Make the work environment stimulating and engaging so the firm is a great place to work at. (employee suggestion and view counts)
6) Strive to retain talented, high-performing employees via promotion, salary increases, performance bonuses, stock options etc.
7) Coaching average performers to improve their skills and capabilities while weeding out underperformers

Question 4

3 approaches to building and strengthening capabilities:

Answer 4

1) Internal development
2) Acquiring capabilities through mergers and acquisitions
3) Accessing capabilities via collaborative partnerships

Question 5

Capabilities-motivated acquisitions are essential when:

Answer 5

1) A market opportunity can slip by faster than a needed capability can be created internally
2) Industry conditions, technology, or competitors are moving at such a rapid clip that time is of the essence

Question 6

3 basic ways to pursue accessing capabilities via collaborative partnerships are:

Answer 6

1) Outsource the function requiring the capabilities to a key supplier or another provider
2) Collaborate with a firm that has complementary resources and capabilities in a joint venture, strategic alliance, or other type of partnership established for the purpose of achieving a shared strategic objective
3) Engage in a collaborative partnership for the purpose of learning how the partner does things, internalising its methods and thereby acquiring its capabilities (abuse of trust)

Question 7

Sometimes, outsourcing can lead to several strategy-executing advantages including heightened strategic focus. Such heightened focus on performing strategy-critical activities can yield 3 important execution-related benefits:

Answer 7

1) The company improves its chances for outclassing rivals in the performance of strategy-critical activities and turning a core competence into a distinctive competence. (performing fewer value chain activities mean more effective performance which could enhance competitive capabilities by lowering cost or improving quality)
2) The streamlining of internal operations that flows from outsourcing often serves to decrease internal bureaucracies, flatten the organisational structure, speed internal decision making, and shorten the time it takes to respond to changing market conditions
3) Partnerships can add to a company’s arsenal of capabilities and contribute to better strategy execution

Question 8

The firm’s organisational structure comprises:

Answer 8

the formal and informal arrangement of tasks, responsibilities, and lines of authority and communication by which the firm is administered.

It specifies the linkages among parts of the organisation, the reporting relationships, the direction of information flows, and the decision-making processes.

It is a key factor in strategy implementation since it exerts a strong influence on how well managers can coordinate and control complex set of activities involved

Question 9

Why is strategy-supportive organisational structure important?

Answer 9

1) Without a supportive structure, strategy execution is more likely to be bogged down by administrative confusion, political maneuvering, and bureaucratic wastes

2) It may even contribute to the firm’s ability to create value for customers and realise a profit.
(a) By enabling lower bureaucratic costs and facilitating operational efficiency, it can lower a firm’s operating costs.

(b) By facilitating the coordination of activities within the firm, it can improve the capability-building process, leading to greater differentiation and/or lower costs.
(c) By improving the speed with which information is communicated and activities are coordinated, it can enable the firm to beat rivals to the market and profit from a period of unrivaled advantage

Question 10

The 4 basic types of organisational structures are:

Answer 10

1) Simple structure
2) Functional structure
3) Multidivisional structure
4) Matrix structure

Question 11

What is a simple structure characterised by?

Answer 11

1) Limited task specialisation
2) Few rules
3) Informal relationships
4) Minimal use of training, planning, and liaison devices
5) A lack of sophisticated support systems

Question 12

What are the advantages of a simple structure?

Answer 12

1) Low administrative costs
2) Ease of coordination
3) Flexibility
4) Quick decision making
5) Adaptability
6) Responsiveness to change
7) May foster creativity and heightened responsibility due to informality and lack of rule

Question 13

Simple organisational structures are typically employed by:

Answer 13

Small firms and entrepreneurial start-ups

Question 14

What is a simple structure?

Answer 14

It is one in which a central executive handles all major decisions and oversees the operations of the organisation with the help of a small staff

Aka line-and-staff structures or flat structures

Question 15

What is a functional structure?

Answer 15

It is one that is organised along functional lines, where a function represents a major step in the firm’s value chain, such as R&D, engineering and design, manufacturing, sales and marketing, logistics, and customer service, supervised by functional line managers who report to the CEO and small corporate staff

Aka departmental structure/unitary structure/U-forms

Question 16

What are the advantages of a functional structure?

Answer 16

Greater task specialisation which leads to:
1) Promote Learning

2) Enables the realisation of scale economies
3) Productivity advantages

Question 17

What is the disadvantage of a functional structure?

Answer 17

1) The departmental boundaries can hinder the flow of information and limit the opportunities for cross-functional cooperation and coordination

Question 18

What is a multidivisional structure?

Answer 18

It is a decentralised structure consisting of a set of operating divisions organised along market, customer, product, or geographic lines, and a central corporate headquarters, which monitors divisional activities, allocates resources, provides support functions, and exercises overall control

Aka divisional structures/M-forms

Common among companies pursuing diversification strategy or global strategy

Question 19

What is the significant advantage of multidivisional structures over functional structure?

Answer 19

In terms of facilitating the management of a complex and diverse set of operations:
1) Putting business-level strategy in the hands of division managers while leaving corporate strategy to top executives reduces the potential for information overload and improves the quality of decision making in each domain

2) This also minimises the costs of coordinating divisionwide activities while enhancing top management’s ability to control a diverse and complex operation
3) It can also help align individual incentives with the goals of the corporation and spur productivity by encouraging competition for resources among the different divisions

Question 20

Multidivisional structure can present some problems to a company pursuing related diversification because:

Answer 20

Having independent business units - each running its own business in its own way - hinders cross-business collaboration and the capture of cross-business synergies

Question 21

What is a matrix structure?

Answer 21

It is a combination structure in which the organisation is organised along two or more dimensions at once (eg. business, geographic area, value chain function; with multiple reporting relationships) for the purpose of enhancing cross-unit communication, collaboration, and coordination.

Aka composite structures/combination structures.

Often used for project-based, process-based, or team-based arrangement (eg. consulting, architecture, engineering services)

Question 22

What is the advantage of matrix structures?

Answer 22

1) They facilitate the sharing of plant and equipment, specialised knowledge, and other key resources - they lower costs by enabling the realisation of economies of scope
3) Flexibility in form and allow for better oversight since supervision is provided from multiple perspectives

Question 23

What are the disadvantages of matrix structures?

Answer 23

1) They add an additional layer of management, thereby increasing bureaucratic costs and decreasing response time to new situations
2) There is a potential for confusion among employees due to dual reporting relationships and divided loyalties

Question 24

What are the underlying principles/tenets of a centralised organisational structure?

Answer 24

1) Decisions on most matters of importance should be in the hands of top-level managers who have the experience, expertise, and judgement t decide what is the best course of action
2) Lower level personnel have neither the knowledge, the time, nor the inclination to properly manage the tasks they are performing
3) Strong control from the top is a more effective means for coordinating company actions

Question 25

What are the advantages of centralised organisational structures?

Answer 25

1) Fixes accountability through tight control from the top (easy to know who is accountable when things don’t go well)
2) Eliminates goal conflict among those with differing perspectives or interest
3) Allows for quick decision making and strong leadership under crisis situations

Question 26

What are the disadvantages of centralised organisational structures?

Answer 26

1) Lengthens response times by those closes to the market conditions because they must seek approval for their actions
2) Does not encourage responsibility among lower-level managers and rank-and-file employees
3) Discourages lower-level managers and rank-and-file employees from exercising any initiative

Question 27

What are the underlying principles/tenets of a decentralised organisational structure?

Answer 27

1) Decision-making authority should be put in the hands of the people closest to, and most familiar with, the situation
2) Those with decision-making authority should be trained to exercise good judgement
3) A company that draws on the combined intellectual capital of all of its employees can outperform a centralised organisational structure

Question 28

What are the advantages of decentralised organisational structures?

Answer 28

1) Encourages company employees to exercise initiative and act responsibly
2) Promotes greater motivation and involvement in the business on the part of more company personnel
3) Spurs new ideas and creative thinking
4) Allows fast response to market change
5) May entail fewer layers of management

Question 29

What are the disadvantages of decentralised organisational structures?

Answer 29

1) Top management lacks “full control” - high-level managers may be unaware of actions taken by empowered personnel under their supervision
2) Puts the organisation at risk if empowered employees happen to make “bad” decisions
3) Can impair cross-unit collaboration

Question 30

What the the roles and functions of relationship managers in strategic alliances or external partners?

Answer 30

1) Getting the right people together
2) Promoting good rapport
3) Seeing that plans for specific activities are developed and carried out
4) Help adjust internal organisational procedures and communication systems
5) Ironing out operating dissimilarities
6) Nurturing interpersonal cooperation

Question 31

What is a network structure?

Answer 31

A network structure is the arrangement linking a number of independent organisations involved in some common undertaking

Question 32

Structuring the organisation and organising the work effort in a strategy-supportive fashion has 4 aspects:

Answer 32

1) Decide which value chain activities to perform internally and which ones to outsource
2) Align the firm’s organisational structure with its strategy
3) Decide how much authority to centralise at the top and how much to delegate to down-the-line managers and employees
4) Facilitate the necessary collaboration and coordination with external partners and strategic allies

Question 33

What are the two best signs of good strategy execution?

Answer 33

1) Whether a company is meeting or beating its performance targets
2) Performing value chain activities in a manner that is conducive to companywide operating excellence